Best payment Strategy 2014/15

[pacontracting]

Does anyone have any guidelines for making the most of the £2K Employers NI allowance for PAYE salary?

Currently - with the 1000L code, it appears £833.33/month is the best amount to pay yourself but this doesn't take into account the extra employee NI available to companies.

[Jessica@WhiteFieldTax]

I went back to basics and ran some models, and conclusion was £10k.

You are welcome to take a look, E&OE

https://www.whitefieldtax.co.uk/web/...ent-allowance/

[pacontracting]

Thanks. My accountant has run some calcs and has suggested that £15K for a single director appears to be the optimum amount (taking into account the slight reduction in corporation tax this salary incurs based on company income over 100K)

[Jessica@WhiteFieldTax]

Erm, unless I'm missing something, Corporation Tax doesn't change at £100k.

There is the personal allowance clawback at that level, which impacts Income Tax. Off the top of my head that ought to be neutral between dividend and salary mix, as the Employment Allowance only creates variables lower down the equation.

Anyway, if you are not sure it's best get your accountant to run some numbers tailored to your circumstances.

HTH

[Alias]

I attempted to put together a spreadsheet but I'm not sure if I've calculated the NI correctly or applied the £2k allowance properly. Please feel free to point out any errors:

https://docs.google.com/spreadsheet/...Xc&usp=sharing

On balance, it does look like taking the full £10k allowance as salary saves about £200 in tax, if I've done my sums correctly.

As previously discussed (multiple time )...a search on here can be your friend....

[TheCyclingProgrammer]

As previously discussed (multiple time )...a search on here can be your friend....

Saved me a job, thanks. For most people the answer is £10k. It might not be for some, depends on circumstances like actual tax code, whether they are sole shareholder or not etc. (an increased salary reduces the amount of dividends you can take before reaching higher rate which in turn can reduce your other shareholder's dividend income if your aim is to not exceed it).

[TheFaQQer]

As previously discussed (multiple time )...a search on here can be your friend....

http://forums.contractoruk.com/accou...-factored.html

http://forums.contractoruk.com/accou...alary-10k.html

And if you want to play around with the figures, there's a Google docs spreadsheet from TCP that does the calculations here.

[Martin at NixonWilliams]

Thanks. My accountant has run some calcs and has suggested that £15K for a single director appears to be the optimum amount (taking into account the slight reduction in corporation tax this salary incurs based on company income over 100K)

£10,000 is a lot better than £15,000 - For everything you pay above £10,000 you are suffering 20% income tax and 12% national insurance, although you will get corporation tax relief of 20%.

For anything like this I would always compare the take home pay, the effect on the company's retained earnings and the effect on your allowances/tax bands.

For the additional £5,000 salary mentioned above, your take home pay would be £3,400 and the company's retained eanings would be reduced by £4,000. This would also use up £5,000 of your basic rate allowance.

If you were to reduce your retained earnings by £4,000 by paying a dividend instead, your take home would be higher (£4,000) and you would also use less of your basic rate allowance (£4,444). This frees up more of your basic rate band allowing you to take more dividends from the company without incurring additional tax.

I hope this helps.

Martin

[TheFaQQer]

Thanks. My accountant has run some calcs and has suggested that £15K for a single director appears to be the optimum amount (taking into account the slight reduction in corporation tax this salary incurs based on company income over 100K)

Plug the figures into the spreadsheet I linked to above and you'll see that isn't the case.

[Alias]

Plug the figures into the spreadsheet I linked to above and you'll see that isn't the case.

If you read my post properly, you'll see I linked to it too